Federal agents arrested Carlos Watson, the CEO and founder of digital start-up Ozy Media, Thursday (Feb. 23) on federal fraud charges related to his attempt to financially save his struggling company, the U.S. Department of Justice said.

Prosecutors charged the company and Watson with conspiracy to commit securities fraud and conspiracy to commit wire fraud in connection with a scheme to defraud Ozy’s investors and lenders. Watson is also charged with aggravated identity theft for his role in the impersonation of multiple media company executives.

“As alleged, Carlos Watson is a con man whose business strategy was based on outright deceit and fraud – he ran Ozy as a criminal organization rather than as a reputable media company,” U.S. Attorney Breon Peace said.

If convicted, Watson faces a mandatory minimum sentence of two, and up to 37 years in prison.

FBI agents arrested Watson, 53, at a Midtown Manhattan hotel Thursday morning, The New York Times reports. He pleaded not guilty to all counts at his arraignment later that day in Brooklyn federal court. Authorities released Watson after he posted a $1 million bond.

Earlier this month, Samir Rao, 36, Ozy’s former chief operating officer, and Suzee Han, 29, Ozy’s former chief of staff, pleaded guilty to fraud charges.

After Watson’s arrest, the Securities and Exchange Commission (SEC) announced that it charged Ozy Media, Watson, Rao and Han “with defrauding investors of approximately $50 million through repeated misrepresentations concerning the company’s basic financial condition, business relationships, and fundraising efforts.”

Rao and Han have settled the SEC civil case against them.

"I am deeply disappointed by the events of today," Watson's attorney, Lanny Breuer, said after the arrest, according to CBS News. "We were engaged, I thought, in a good faith and constructive dialogue with the government. And given the government's claims of promoting such dialogue in general, I simply do not understand the dramatic decision to arrest Carlos this morning."

Founded in 2013, Ozy claimed that it was "ahead of the curve" but in reality lost millions of dollars before it shut down amid allegations of deceptive business practices, CBS News reports. Insurmountable debt forced the company’s executive to rely on high-interest loans and aggressively pursue investors.

Prosecutors allege that between 2018 and 2021, Watson, Rao, Han and alleged co-conspirators “orchestrated a scheme to defraud investors in and lenders to Ozy of tens of millions of dollars through fraudulent misrepresentations and omissions about key aspects of Ozy’s business, including Ozy’s financial results, debts, and audience size,” including lying to prospective investors about who might invest in the failing company.

In 2021, The Times reported that someone at Ozy had apparently impersonated a YouTube executive during a conference call with Goldman Sachs, which was considering a $40 million investment in the company. The impersonator, claiming to be a YouTube executive, said the video platform had a great working relationship with Ozy, which produced successful video content.

That report prompted federal prosecutors and the SEC to launch a probe of Ozy, which announced plans to shut down operations.